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Revision to the Pre-Action Protocol for Construction and Engineering Disputes

It was announced on 2 November 2016, that a new Pre-Action Protocol for Construction and Engineering Disputes (the "Protocol") is expected to come into force on 9 November 2016.

The reason for the New Protocol relates to a number of concerns that users of the old Protocol had as to its effectiveness. For example a Technology and Construction Solicitors Association ("TeSCA") survey of the existing Protocol relating to 677 disputes, found that 41% of clams were resolved at the pre-action stage. However, that still left 51% of claims proceeding beyond the Protocol and 8% to trial. TeSCA held a further survey in January 2016, this time collating industry opinion on the existing Protocol, to assist with reforms to improve the number of disputes settling at pre-action stage. Whilst 95% of participants in that survey found that the Protocol was a valuable tool, there was clearly appetite for amendment, largely due to criticism of potential Defendants taking too long to respond to claims and the costs associated with Protocol compliance.

The following are the key and new amendments to the Pre-Action Protocol:

Whilst the Protocol is not voluntary, the parties can agree to opt out.

The Letter of Claim requirements have been modified so that only a brief summary of the claim and relief sought is needed, and an expert report is no longer expected nor required.

The Letter of Response is still due to be issued by the potential Defendant within 28 days but this can only be extended by a further 28 days.

The parties cannot agree to extend any deadlines beyond 28 days in the aggregate.

The new Protocol introduces a new regime which is currently referred to as the Protocol Referee procedure. This is an entirely contractual procedure which the parties will need to agree to adhere to.

The procedure involves the appointment of an independent referee from TeCBAR or TeSCA with a fee of £3,500 plus VAT to regulate compliance with the pre-action process.

One of the issues that arose with the existing Protocol was that it was being abused and each party would blame the other for not complying. For example, by not providing enough information in a Letter of Claim, or an expert report not being attached. The independent Protocol Referee is intended to avoid the parties becoming entrenched and uncooperative.

It will be seen whether the new Protocol encourages early resolution of disputes without disproportionate costs being incurred. The Response phase resolution may well be a concern as it appears to be a "one size fits all" procedure, which ignores circumstances where both parties agree that the facts are sufficiently complex to warrant more time. Having said that, the requirements of the Letter of Response have also been modified so that only a brief and proportionate summary of the Defendant’s response to the claim and a brief summary of any counterclaim is required. We will wait to see how it is received.